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Nic Cicutti: The self-interest of basic advice lobbying

One of the more interesting aspects of the RDR’s implementation over the past two to three years has been the changing attitude of financial advisers towards the new QCF Level 4 requirement.

Actually, I’d better rephrase that: it’s less a case of a change in attitude than a dawning realisation that QCF level 4 has turned out to be nowhere as difficult to achieve as many advisers thought might be when the idea was originally proposed by the FSA.

While many IFAs still resent having been made to study for and sit a whole series of new exams, the vast majority have been able to pass them with ease. The result is that, albeit reluctantly, advisers are now better-qualified.

What is more, quite a few who initially opposed the RDR’s qualification requirement have contacted me to say they feel proud at having passed their exams. They feel, dare one say it, more professional as a result.

So why is it, that at a time when IFAs have finally succeeded in creating a level playing field between themselves and the banking industry, some are now prepared to allow it back in to eat their lunch?

That has to be the only conclusion one can draw from a proposal, originally made by the ABI and the Association of Mortgage Intermediaries last month, for a “basic advice plus” regime that would allow salespeople with a QCF Level 3 qualification to sell a suite of “simple” products, such as protection.

To justify their call, they point to the report in August by the Government’s independent steering group, chaired by former Lloyds Bank head of risk Carol Sergeant, which recommended a few basic financial products should be made available to consumers.

Sadly for them, Carol Sergeant’s report said nothing about multiple products. Its key recommendations were for an easy access savings account, a 30-day notice account and a simple term life insurance product, as well as kitemarking to ensure these products are identifiable to consumers.

Undaunted by this minor problem, in support of their proposals the ABI and AMI are throwing into the argument the names of every organisation and individuals who have ever had a thought vaguely akin to their own over the past decade or more.

Hence the namechecks by AMI director Rob Sinclair of “Ron Sandler, the basic advice regime, Mifid in its current and future incarnations and the thoughts in IMD II and Prips.” Not forgetting the humble kitchen sink, of course.

To justify this line, they talk about “the social issues of a pensions time-bomb, the recognised saving and protection gap and the loss of mass-market advice to middle income groups by the closure of the tied advice arms of most of the major banks.”

Yet it is not clear in Sinclair’s paean to basic advice how it would solve the problems he outlines. Presumably, Carol Sergeant’s term assurance proposal would take care of some of the “protection gap” he refers to. What other protection products does he have in mind? Is there evidence in the past decade of bank salespeople successfully bridging any remaining gaps, with or without the QCF Level 4 qualifications they currently don’t have?

As for his reference to a “pensions time bomb”, it comes at the same time a government’s launch of auto-enrolment. I accept that auto-enrolment is not the full answer to people’s potentially dire long-term retirement incomes.

Yet somehow Sinclair imagines that his “middle income groups”, unhappy at the fact that they are facing deductions from their income, unconvinced by the potentially low investment returns of their pension pots and dismayed by the low annuities on offer when they finally do retire, will somehow see the solution to all this lies in a personal pension from a bank.

Now, one knows why the ABI are so keen to see the introduction of a basic advice regime. It wants to see banks continue to distribute its members’ products, simple as that. To that end, it is prepared to accept a vast number of potential casualties among millions of consumers who, if previous widely-documented experiments by the FSA are anything to go by, are at risk of massive mis-selling if such a regime is introduced.

But why has Sinclair thrown his organisation’s lot in with the ABI? A clue lies in a sentence of his article in Money Marketing, where he describes how poorly-qualified advisers would be able to basic advice as a “bridge to deliver the advisers of the future at the more senior level”.

He adds: “However it might also allow mortgage advisers who choose this route to provide more holistic solutions to a broader population.”

In other words, thousands of QCF Level 4 certified advisers – and millions of consumers – must pay so that Sinclair’s under-qualified members can do more than sell mortgages. Sounds like self-interest disguised as public interest.

Nic Cicutti can be contacted at


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. “Thousands of IFAs with QCF Level 4 qualifications, who intend to circumvent the FSA’s plans by moving to restricted advice so they can continue to cream commission off their clients”

    What on earth are you garbling about, Nic.

    As a QCF5 adviser I am planning on going the restricted route. There is abosl;utely no financial incentive for me to do so. Cream, we’re lucky to get rancid milk at the moment.

    Your article is as riddled with flaws asthe RDR itself.

  2. Nic

    Your comments are spot on and we should never allow basic advice to see the light of day as an industry as this is just an excuse to allow banks to distribute products that could potentially be mis-sold to millions of people.

    I know loads of people may disagree with the fact that RDR has raised standards and particularly the education levels of advisers. I think in the long term advisers will become more like solicitors and accountants and looked upon with greater respect than they are at present.

    I would agree with you totally that the only reasons why the ABI is supporting this concept is to allow banks to get back into the advice industry and continue their mis-selling practices that they have been so guilty of over the last couple of decades.

    My message to the regulator would be don’t do it.

  3. Oh Nic, I hate to say this, but you and all the other press pundits now coming around to the view of IFAs that the RDR and its daft structure will inevitably place the consumers at a disadvantage when they go into their bank or building society or get hooked in by a “restricted” adviser selling product, not providing a financial planning service, need to wise up, no use complaining now about how it is going to adversely affect consumers, it is what it is and will fail to achieve bette consumer outcomes, simply because those who put it together are not Financial Planners or even qualified to the level they say we should be.

    I have no issue with higher qualifications for all “advisers” as this bring us up to a higher level of expertise and knowledge although like many advisers of my age group over 60, one of the stumbling blocks is the RO6 papers, which although purported to show we know what we are talking about, do not represent a fair assessment either of knowledge or planning expertise, but appear to have been deliberately constructed to confuse and confound candidates in the methodology employed in question construction.

    I have taken this paper twice now, awaiting the results of the re-sit, but not confident that I can pass it once again as not only is the study material pretty confusing, the methodology employed to prove competence does not allow time to properly construct solutions tothe expressed financial planning needs contained in the two case histories. (one simple, one complex)

  4. Interesting article however I don’t understand the point …. “What is also unclear is why thousands of IFAs with QCF Level 4 qualifications, who intend to circumvent the FSA’s plans by moving to restricted advice so they can continue to cream commission off their clients………”.

    By being restricted does not mean you can still charge commission – unless I’m missing the point being made.

  5. Couldnt agree more.

    The FSA shouldn’t be allowed to start moving the goal posts now.

    Either introduce RDR (not saying I agree with everything it contains) or abandon it altogether.

    If the FSA starts making concessions regarding ‘simple’ products where does it stop?

  6. Commissions go from next year whether you’re tied restricted independent or any other shade. No Ifs and no buts-The FSA has written Dear CEO letters warning of dire consequences for anyone trying to circumvent this.

  7. For once, I totally agree with Nic Cicutti. Some advice for Ned Taylor – you might improve your chances of passing if you were to take a few pointers in how to construct a sentence.

  8. To – Anonymous – Those who hide behind the benefit of anonimity very rarely have anything useful to add to the discussion and for want of a better reposte, my name is not Ned Taylor, it is Ned Naylor.

  9. To Ned Naylor

    I also struggled with the RO exams and in the end chose a different route and I would highly recommend the investment planning diploma for existing advisers which is done through the Chartered Institute of Bank of Scotland which is a Level 5 Diploma and is only one paper which is taken in a three hour exam.

    The exam is based on case studies style and although it is tough I found it easier than the RO exams done by the CII as is more based around what IFA is actually do for a living.

    Don’t be fooled on only having to take one paper though it is a tough exam that the results come through very quickly which is handy if you need to resit.

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